Selby Jennings' Head of Fund Management and Fundamental Research discusses relocating abroad in Fund

Date:
07 February 2013

To globetrotters, overseas transfers have always appealed. Now, however, even as the industry has become more truly global, they face tight relocation budgets and tougher competition for slots. Some asset managers are looking at transfers more strategically, while others are cutting back altogether, according to veterans in the field.

The high cost of moving people, the tightening of immigration policies and the availability of talent in local markets have diminished the likelihood that asset managers will relocate employees overseas, says Natalie Basiratpour,head of research and fund management at recruitment firm Selby Jennings. And when they do, the large financial incentives are a thing of the past, she adds.

“Companies don’t offer a huge expat package any more. They used to add another 60% to 70% on people’s salary,” says Basiratpour. “People are trying to hire locally as much as possible.”

Dick Oswald, managing director and head of the client portfolio manager team for the global fixed income platform atJ.P. Morgan, says the packages on offer when he moved from New York to London in 2000 are “more generous then what is offered now”. Speaking about his group, rather than J.P. Morgan generally, he says the days of companies handing a relocating employee a lump of money to spend however they want are over.

A typical relocation package now includesone way, business-class flights, three to six months of temporary accommodation, full shipping of belongings, a relocation agent and some help with taxes, says Basiratpour.

This compares to the heyday when employees received all of the above and a fixed fee to use on accommodation or to take as cash, a living allowance, additional salary to support the tax difference between countries, two first class, returns flights for each family member, all private school fees, possessions shipped back and a full relocation to the home country when they leave. On top of this, Basiratpour says employees were often handed a signing bonus and a lump sum for other expenses, for which they did not need to produce receipts.

However, despite these cutbacks, research from Ernst & Young, which looks at all sectors rather than asset management specifically, says the cost of sending someone on an assignment overseas is still around three to six times higher than keeping the employee at home.

Another way of cutting back on costs is moving younger individuals, who are single and have fewer ties, with Basiratpour saying there is “a 100% bias to younger people that don’t have a family or children.” But the return on this investment does not tend to be as high. “You can usually find entry-level people in the local markets to fill these roles. The amount of expertise transferred from one place to another doesn’t help the company that much,” says Oswald.

Costs are incurred not just by relocating an employee and their family, but by interviewing them. “Companies don’t want to spend lots of money flying people over for interviews,” says Basiratpour. "Unless they are in the location already it makes it almost impossible to hire."

That said, she adds that companies with a presence already in that country can use local offices to interview staff, while using technology such as Skype to interview, something she says would have seemed “a bit crazy” five to six years ago, is more commonplace.

The use of technology such as tele-conferencing and video presence calls has also cut into global mobility, making it easier to have natural communications between countries, says Oswald.

And while the ease of travel makes remote managing of teams easier, time remains an issue. “If the role is investment oriented, then they need to be on trading floor and in the same time zone,” says Basiratpour.

Even companies that want to move their staff, may find visa restrictions limit them. Key markets such as the U.K., the U.S. and Russia have long waiting times for visas, if they are even granted.

However, rather than drawing back on moving employees around the globe, according to Mercer’s North America leader for the mobility business, Ed Hannibal, companies are just being more strategic about it.

“Companies are taking three steps back and looking at the roles they are filling globally,” he says, adding that relocations to fill short-term skills gaps -- typically 12-month assignments for a single person rather than a semi-permanent family move. The Ernst & Young research likewise predicts short-term assignments will increase more than long-term assignments over the next two years.

Hannibal adds that while cost is obviously a big concern for companies, it is not the only driver: “I think it’s about the company and the employee finding what’s in it for both sides.” This is reflected in the approach now, says Basiratpour. “A lot of people won’t interview someone unless they have a good story about why they want to move to that country, whereas before the company would be willing to convince them.” And, she says, this is harder to find for some of the major markets.

“People used to be desperate to move to New York, London and Hong Kong, but you don’t find that now as much,” explains Basiratpour. She says that some companies moved out of such financial hubs and the spread of talent has shifted demand. “The attraction was to move to these cities to work with really smart people, but you don’t need to be in these cities to get that anymore,” she adds.

Even after employees have been through this process, there is no guarantee they will stay. The Ernst & Young report says more than one in 12 companies had at least 11% of international assignees return before the end of their contracts, with personal, rather than professional, issues being blamed in most instances.

One potential risk on tighter budgets is that that employees may feel short-changed compared to peers. Hannibal says this is a concern companies can handle with transparency: “You can’t have a black box approach. People trade stories and that’s where companies need to be clear and upfront on what the full package will look like and what the opportunities are.”

While opportunities might be fewer and less luxurious than in the past, an overseas gig remains an opportunity for valuable experience. “My advice is to take the chance,” says Oswald. "it's an experience you will look back on favorably."